Internet Ad Revenue Charges Ahead

Internet Ad Revenue Charges Ahead
IAB Suggests 35% Growth in Its Year-End Report
By Emily Tan

Published: May 24, 2007

NEW YORK (AdAge.com) -- Internet ad revenue grew 35% in 2006, with search, display, classifieds and lead-generation categories continuing to rise at a healthy clip while e-mail, sponsorship and slotting fees remained flat or lost share of the total online ad market.
The IAB said online growth is coming from advertisers using the web to drive product awareness, purchase intent and brand loyalty.

The figures come from the Interactive Advertising Bureau's quarterly Internet Advertising Revenue Report released today, which included both fourth-quarter and full-year 2006 figures.

Hit record high
U.S. online ad revenue reached a record high of $4.8 billion last quarter, an increase of 33% over the 2005 fourth quarter. The 2006 full-year total was $16.9 billion. Display advertising and keyword search were up $3.7 billion and $6.8 billion, respectively, last year.

Randall Rothenberg, president-CEO of the IAB, said in the announcement that the growth is coming from advertisers using the web to drive product awareness, purchase intent and brand loyalty. "We have every confidence that this growth trend will continue as marketers allocate more of their total marketing dollars to interactive and the industry delivers effective and innovative platforms for connecting with consumers," he said.

As in past years, ad revenue was concentrated among top publishers. The top 10 raked in $11.6 billion, or 69% of total online ad revenue, down slightly from the 72% share those publishers had in 2005. The top 50 publishers accounted for 93% of the online ad market.

Rich-media share drops
While much of the buzz circulates around broadband video, rich media as a share of total online ad revenue actually dropped, increasing total dollars by a lower-than-industry rate, from $1 billion in 2005 to $1.2 billion in 2006. But Sheryl Draizen, senior VP-general manger, IAB, said that the growth is coming.

"I think that everyone is talking about broadband digital video, but it hasn't happened yet," Ms. Draizen said. "There's still a lot of potential."

E-mail's share remained flat, although total dollars spent on the tactic was up 34% to $338 million. Ms. Draizen suggested e-mail may be reaching a plateau and that spam-blocking by consumers also is a key factor in its slow growth. The IAB has developed guides to provide marketers with information that will make e-mail campaigns more effective.

"Authentication and deliverability issues for e-mails need to be delved into," Ms. Draizen said. "It's really about what are the best practices for e-mail that they have the highest percentages to get to the audiences they need to reach."